Analysts: Tesla Model X Production Ramps Up, Battery Cell Density Improves As Price Per kWh Continues To Fall

1 year ago by Eric Loveday 43

Tesla Model X Being Built By Robots

Tesla Model X Being Built By Robots

Tesla Shows Off The Model S Glider And 8,000 Odd Panasonic 18650 Cells That Power The Car

Tesla Shows Off The Model S Glider And 8,000 Odd Panasonic 18650 Cells That Power The Car

ValueWalk recently published an article on Tesla’s stock rebound. In that article, ValueWalk cites analysts from Goldman Sachs, as well as other firms, with providing the following information:

  • Model Xs are now coming down the assembly line “interspersed with Model S vehicles.”
  • Model X body shop still not at full capacity
  • Tesla is performing burst builds of Model X – or assembling a group of Xs and then inspecting them completely at multiple stages during the process
  • Tesla continues to improve its battery cells in density, safety and longevity
  • Tesla would only put out an approximate cost per kWh for battery cells – $200 per kWh

The takeaways seem to be that Model X production is still very much in the ramp-up stage and that Tesla is continually improving its (well, Panasonic is involved obviously, too) battery cell, pack technology, while cutting costs at the same time.

Our own recent analysis would indicate production of the Model X was fairly flat between December and February, but that the company will soon ramp up that output, as it has recently released a new batch of production allocation/VINs to “general order” Model X customers beginning in the second half of February

Source: Value Walk

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43 responses to "Analysts: Tesla Model X Production Ramps Up, Battery Cell Density Improves As Price Per kWh Continues To Fall"

  1. Three Electrics says:

    I would very much like to see a 110+ kWh pack option for the X. For skiing and camping the current range is not sufficient, because there are no superchargers out in the bush.

    1. Anon says:

      It would help with towing, too.

    2. Mikael says:

      It will come when the back-log is done and tesla needs a reason to keep up (or increase) demand.
      It’s probably 2 years away. Then it will be a differentiator to the Model3/Y too.

    1. Pushmi-Pullyu says:

      The price for li-ion batteries varies widely. It varies by exact chemistry, by voltage, and by form factor. Not all li-ion batteries are created equal; some have higher power density, others have higher energy density, some are more expensive than others. Also, of course, customers buying in large volume may get a large volume discount.

      Citing a price paid by one random customer means very little, especially when buying used or “factory second” batteries.

      It was quite a surprise when GM let slip the price it is paying LG Chem for battery cells for the Bolt: $145/kWh. But that may well be a “sweetheart deal” that LG offered as part of a package deal, since LG Electronics is building powertrains for all the Bolts.

      Other than that one data point, we don’t know what price EV makers are currently paying for their batteries. Some claim Tesla is paying Panasonic even less than GM is paying LG, but personally I doubt that’s true. Now, when the Gigafactory starts producing cells in volume, it may well offer Tesla a price competitive to that $145/kWh, or perhaps even less.

      1. jerryd says:

        There is another data point. Musk after the $145/kwhr LG price came out Musk commented Tesla was significantly lower in cost which I took to be about $125/kwhr.

        1. Pushmi-Pullyu says:

          Do you have a citation for that?

          All I can find by Googling is paraphrases of Musk saying that he would be surprised if costs did not fall below $100/kWh by 2020… which is the planned date of full production of the Gigafactory.

          Nothing about Tesla’s current costs.

  2. David Murray says:

    wow.. so General Motors may be paying less for batteries than Tesla? I wonder what their battery costs will be after the Gigafactory comes online?

    1. Alaa says:

      I wonder what the price of salvaged batteries will be!

    2. Breezy says:

      Double wow. If true, there goes that supposed competitive advantage.

    3. GeorgeS says:

      @David
      Yes I’ve heard that Tesla will get close to LG chems price and production capacity once the giga factory is fully done 🙂

      1. Pushmi-Pullyu says:

        The Gigafactory will exceed LG’s production capacity by quite a bit. LG Chem talks big, but in first quarter last year, it was only the #4 battery maker (source below). Panasonic is by far #1, and Tesla is buying most or nearly all its supply.

        http://evobsession.com/ev-battery-manufacturer-sales-market-share-march-2015/

        1. ModernMarvelFan says:

          “but in first quarter last year, it was only the #4 battery maker (source below). ”

          Past performance is no guarantee of future returns…

          1. Pushmi-Pullyu says:

            But the production capacity of factories now producing, and now being built, are a pretty darn good indicator of what capacity will be in two years, because it takes two years to build a factory and fine-tune it for efficient mass production.

            LG Chem’s planned increase in production over the next few years is nowhere near as ambitious as Tesla’s, despite LG’s boasts.

        2. GeorgeS says:

          @PMPU
          good find on the article. interesting. That is what they actually produced but not manufacuring capacity that is sitting idle.

          Holland Mi LG plant has capacity for 60,000 volt packs. That’s 1 GWH at LG Holland alone.

          1. Pushmi-Pullyu says:

            Plans for the Gigafactory are to produce 35 GWh of cells annually by 2020. One GWh sounds like a lot, but it’s not compared to the Gigafactory if and when it reaches full production.

    4. Andrew says:

      I’m under the impression that the projected Bolt $/kWh is at the cell level and contingent on GM buying a ton of other parts from LG (drive unit, infotainment, OBC, etc). It’s also a projection one year from now. Rumors are that LG was very displeased about this disclosure.

      Tesla’s cost is today and it’s at the pack level. None of the cells are from the gigafactory yet so those savings have yet to be realized.

      If I’m not mistaken Tesla is aiming for $100/kWh at the pack level in the next few years.

      1. Breezy says:

        The Bolt $/kWh is at the cell level, but so is the Model X $200/kWh according to the article.

        That being said, I’m skeptical about anything that analysts say.

        1. Nix says:

          Breezy, the original article is vague. They mention both “cell” and “pack” in the same paragraph:

          “Also on their manufacturing tour, Archambault and team found that Tesla continues to improve its battery cells in density, safety and duration, with some tests checking for more than 1,000 cycles to improve duration. They noted that although the automaker doesn’t specifically outline exact costs, representatives said $200 per kilowatt-hour is about where they are right now, and they’re targeting less than $100 per kilowatt-hour per pack.”

          Considering this not Tesla writing this, and it is instead some reporter who may or may not even understand the difference, there is absolutely no way to tell for certain whether this is cell or pack numbers.

        2. Tech01x says:

          The original source article says this:

          “They noted that although the automaker doesn’t specifically outline exact costs, representatives said $200 per kilowatt-hour is about where they are right now, and they’re targeting less than $100 per kilowatt-hour per pack.”

          At the pack level, they are saying that Tesla is in the $200/kWh neighborhood. That brings the cell pricing probably in the same $140-$150/kWh neighborhood as GM’s announcement of the LG cells.

          However, several things to note:
          * GM’s expected pricing of the cells is $145/kWh through 2019.
          * Tesla’s expected pricing of the cells is supposed to drop when the Gigafactory comes online and the costs should continue to drop.
          * Tesla’s cells have a higher specific energy and therefore are superior in the most important metric wrt BEVs.

          1. Nix says:

            That presumes that the original author got the story right. Which I don’t assume at all.

            Way too many times I’ve seen sloppy journalists completely mix up cell price and pack price when putting together stories. They might pull one piece of data about cell prices from here, and another piece of data about pack prices from there, and then slap them together under the same label as if they were the same thing.

            I’ve seen way too many stories that compare X price to Y price, as if they were both cell prices, or both pack prices — just to go to their sources and find that one is a cell price and the other is a pack price and the comparison is meaningless.

            The sentence before the one you quote, the author is talking about cells, then shifts into pack prices. Count me as skeptical.

            1. Tech01x says:

              The $200/kWh at the pack level for Tesla’s cost is about right, estimating from a number of sources.

              Tesla charges about $285-300/kWh to the consumer for a new pack. Back out overall gross margin and we are around $220/kWh. Now, the cost of cells was estimated at $160-190/kWh, and Tesla pays in yen to Panasonic. The USD to yen exchange rate has shifted significantly since those pricings and so the price of cells is likely already around $150, of not significantly lower.

      2. Pushmi-Pullyu says:

        A year or two ago, a Tesla rep said that Tesla’s cost for the battery pack was about 25% of the cost of a Model S. With an average sale price (at that time) around $95k-100k, that puts the price of an 85 kWh pack at about $24,375, or ~$287 per kWh.

        While I suppose it’s possible that Tesla’s pack level costs have fallen as far as ~$200/kWh in the time since, that seems unlikely.

        Now, when the Gigafactory is producing battery packs using Gigafactory cells, then I would guess that indeed Tesla’s pack level costs will be near or perhaps even below $200/kWh.

        1. Andrew says:

          Tesla is selling Power Packs today at a retail cost of $250/kWh. Assembled, cooled, etc.

          Unless they’re donating them for karma or something they’re already at or near $200/kWh internally using Japanese cells.

          1. Pushmi-Pullyu says:

            Thanks, Andrew.

            And I can kick myself for an obvious-in-hindsight fallacy in my post above: I cited the average sale price of the Model S, not Tesla’s cost to build it.

            Refiguring: If Tesla makes 25% gross profit on the Model S (that has varied from 20%-27%), then that suggests a pack-level cost (as of a year or two ago) at ~$215/kWh… which certainly does suggest they are at $200/kWh or below by now. And that does suggest rough parity with the cell-level price LG is charging GM for the Bolt: $145/kWh.

        2. TomArt says:

          Carefully-sleuthed estimates from two years ago, appearing in blog posts on Green Car Reports, figured that Tesla was at or below $200/kWh at the cell level back then.

          It is very believable to me that Tesla is now at about $200/kWh at the pack level.

    5. Nix says:

      Going back to the original source, they intermix talking about “cells” and “pack” in the same paragraph. So yet again this opens the door wide open for confusion between the price for cells alone, or the price for the entire battery pack, which includes cells plus cooling, wiring, case, fasteners, etc.

      “Also on their manufacturing tour, Archambault and team found that Tesla continues to improve its battery cells in density, safety and duration, with some tests checking for more than 1,000 cycles to improve duration. They noted that although the automaker doesn’t specifically outline exact costs, representatives said $200 per kilowatt-hour is about where they are right now, and they’re targeting less than $100 per kilowatt-hour per pack.”

    6. RexxSee says:

      Companies are not stupid enough to disclose the real cost of batteries.

      1. Pushmi-Pullyu says:

        Not intentionally. GM accidentally disclosed the price they are (or were) paying for Bolt battery cells when it popped up on a PowerPoint presentation they showed at, if I recall, an automobile trade show.

        In the real world, that PP slide was surely meant only for GM internal uses. Of course, in RexxSee’s conspiracy theorist world, there’s no such thing as an accident. 😉

  3. Breezy says:

    It’s not looking good for meeting guidance. They’re going to need one heck of a March to hit 16,000 deliveries for Q1.

  4. pjwood1 says:

    Jan/Feb are a very slow start, given the 85k-90k targets for 2016.

    At least the supply-constrained narrative is working again.

  5. GeorgeS says:

    BTW, OT

    who is Steven Loveday. A relation to Eric?

  6. If battery prices are really going down all the time, why has the Model S not become cheaper over the last 3 years?

    1. TomArt says:

      Adding features standard. If you can find some screen shots of what was standard in a RWD S60 at the end of calendar year 2012, and you compare that to what is standard in a RWD S70 as of now, you will see exactly why the Model S starting price has gone up, not down.

    2. Andrew says:

      Three years ago the base Model S had a 60 kWh battery, no navigation, no auto-folding mirrors, no parking sensors, no emergency braking, no autopilot hardware, no parcel shelf, no self-presenting door handles (tech pkg), a 3G modem, etc.

      Now the base car has an extra 10 kWh, faster acceleration, all those features standard, and LTE connectivity. And of course autopilot hardware is standard.

      They’re doing the Apple method where the hardware gets more capable at the same price to preserve margins and resale, as opposed to reducing the MSRP.

      1. DonC says:

        Seems exactly right.

      2. Pushmi-Pullyu says:

        Andrew, thank you for that excellent summary.

    3. Someone out there says:

      Because they are still selling like crazy. It doesn’t make sense to lower prices when people are willing to pay the higher price.

      1. pjwood1 says:

        Tesla can’t make them fast enough. If they don’t go from 2,000/month, to 2,000/week they won’t make 85,000 cars this year. They’ve rolled back ~5,000 units in their past estimates, but the 2016 ramp is quickly going to look impossible, at this rate.

        1. Pushmi-Pullyu says:

          Certainly production of the Model X is ramping up far slower than Tesla planned. Whether or not they can make up for that with more volume production and sales of the MS, I dunno.

          Tesla has been, unfortunately, pretty consistent at just barely missing its beginning-of-year guidance for a few years, but this year they may miss it badly because of problems with ramping up production of the Model X.

  7. DonC says:

    That Tesla is having trouble producing the Model X is not a story. It’s been obvious.

    On cell cost, most of the cost of the battery cells are in the raw materials. No idea of what is happening to any commodity price in particular, but generally prices of all commodities are dropping. Hence the cost of cells should be decreasing. Interesting that we never hear about this even when stories reference falling gas prices.

    Tesla has higher costs in making the pack, so if its cell costs are higher its pack costs will definitely be higher.

    1. GSP says:

      Other than Ni and Co, the raw materials actually are not expensive.

      It is the finished materials that are expensive, especially for the cathode. Part of this is the Ni and Co, but most of it is the refining process to purify the materials and produce consistent particle size.

      GSP

      1. Pushmi-Pullyu says:

        Correct, and thanks.

        It’s one of my pet peeves that so many online articles claim that most of the cost of li-ion batteries is the raw materials. But in actuality, other than the cobalt, the raw materials are quite cheap. (Lithium isn’t cheap per pound, but surprisingly little of it is used per kWh.) It’s the cost of the processed ingredients which is expensive. If cheaper processes are found, prices will come down. That has already happened to some extent, and Tesla plans to improve on that at the Gigafactory.